It has been a busy few months for Financial Conduct Authority (FCA), as the watchdog has been rolling out regulation, consultations and initiatives to make sure the financial services industry continues to transform into a place that is fairer to savers.
Its latest push aims to improve consumer engagement with pensions.
The two consultations look to introduce standards for operators of pension dashboards, as well as set out requirements for providers of non-workplace schemes.
With dashboards providing easier access to pension savings data, the FCA will clamp down on operators, more specifically regarding fees, regulatory reporting, record-keeping, prudential requirements and conduct rules.
Under the proposals, operators will be able to offer savers a greater range of services to improve engagement with pensions. These will include investment advice – either in-person or robo – or guidance; models, calculators and similar tools.
Sarah Pritchard, the FCA’s executive director for markets, said: “Pensions dashboards will give savers better access to their data, helping them make better decisions for their retirement. Our proposals will encourage innovation while ensuring that we have the right rules in place to protect consumers.”
At the same time, non-workplace pension providers will be able to offer consumers a default investment option in a bid to support those struggling to make a choice, the FCA said.
Wider options, however, should still be offered to those more engaged with their retirement savings.
The proposed rules also set out that providers will need to send out warnings to consumers about inflation eroding the value of significant and sustained levels of cash holdings.
Firms will have 12 months to implement the rules, but the regulator is encouraging companies to send such warnings now given the current levels of inflation.
“These publications are the FCA’s latest steps to make sure savers are able to access value for money pension products and are supported in their decision-making as they build and access their savings pot,” the watchdog added.
Andrew Tully, technical director at Canada Life, said the latest regulatory push to boost consumer engagement with pension savings is a “positive move” and commended the FCA for listening to “warnings” and recognising that “life-styling will not be appropriate for all investors”.
“Most lifestyle strategies are designed with wholly buying an annuity at a specific age and that is not what most retirees are doing and won’t be the best outcome for many, so we shouldn’t be requiring defaults to be designed in this way,” he continued. “People need advice suitable to their individual needs, taking into account that many will phase into retirement, use drawdown, or withdraw funds as lump sums. As savers’ circumstances change, so do their retirement choices, and investment decisions should change and adapt.
“Saving for retirement and decisions around generating income in retirement are never perfectly linear choices that can be chosen many years before retirement and left alone.
“Everyone is an individual and my belief is that only through seeking regulated financial advice can most savers be confident in making the right ongoing decisions around investing and tax, navigating the rules as they continue through their retirement journey.”